If you can efficiently separate tiny molecules of salt from seawater, you probably have the technology to filter out the larger bacteria, protozoan cysts, viruses and other contaminants floating around in much of the world’s freshwater. That’s part of what Richmond, Calif.-based NanOasis hopes will allow the company to not only provide tech for desalination projects in California, but also eventually sell into the market for water filtration systems in developing countries, the startup’s executives told me. “Water is a huge issue,” said NanOasis founder and President Christopher Kennedy. “Desalination is a starting point.”

NanOasis beat out nearly 99 percent of the applicants vying for a piece of the Department of Energy’s $400 million ARPA-E program, to snag a more than $2 million grant in the first round of awards last week. Over the next two years, the DOE grant will support development of next-gen reverse-osmosis membranes that use carbon nanotubes. Put simply, this could deliver a much more energy-efficient and lower-cost technology for harvesting freshwater from oceans and brackish water.

If NanOasis’ ARPA-E project is successful, it could potentially disrupt the water industry that, according to Christopher Gasson, editor in chief of Global Water Intelligence magazine, can be best described as a dysfunctional train wreck.

Recent advances in nanotech and growing urgency in the push for energy-efficiency improvements and solutions for water scarcity have produced fertile ground for startups. In addition to NanOasis, other companies, including NanoH2O and Oasys, are working on nano-engineered reverse osmosis membranes (update: Oasys is working on forward osmosis tech). And tens of millions of dollars in venture capital have begun flowing into efforts (largely early stage) to reinvent desalination — a technology that Lux Research forecasts will produce three times as much freshwater in 2020 as it did in 2008.

But while a growing number of companies are experimenting with carbon nanotubes (illustrated at left) for water desalination, NanOasis has as its CTO one of the scientists from the Lawrence Livermore National Lab who first developed the technology, Jason Holt. As he explained to Technology Review back in 2006, when his team’s research was first published in the journal Science, “The challenge is to scale up so we can produce usable amounts of these membrane materials for desalination, or gas separation, the other high-impact application for these membranes.” Using the ARPA-E funds, Holt said, NanOasis will be continuing work on the membrane itself, and working out challenges with manufacturing and engineering.

One of the main problems with reverse osmosis desalination tech to date has been that the basic process of pumping water and forcing it through a membrane to separate out the salt is highly energy-intensive — which means high cost. The energy, in the form of electricity, is used mostly to pump the water around and force it, under very high pressure, through the membrane. In fact, the Pacific Institute has estimated that electricity accounts for 44 percent of the cost of reverse osmosis desalination, by far the single largest expense. Carbon nanotubes could drastically reduce that because water can flow through the tiny pores just as fast, with less pressure, than through conventional membranes with larger openings.

NanOasis has a long climb ahead as it looks beyond a pilot project (a portable system with NanOasis tech processing 10,000 to 100,000 gallons of water per day), which Kennedy said is targeted for 2012 or 2013. At commercial scale, challenges can arise from more than the tech itself. Kennedy noted that desalination projects are “particularly capital intensive” and called California “a difficult environment for desalination,” noting that many of the 20 or so desalination projects now at some stage of development in the state have encountered political opposition. (Much of that has come from groups concerned about damage to aquatic life, coastal wetlands and other environmental impacts, in addition to the energy demands and cost.)

Having raised venture capital in June 2008 (investors include X/Seed Capital Management), and also received some research grants (including a nearly $15,000 $150,000 award from the National Science Foundation), Kennedy said the company will be looking to “raise money several more times” before becoming profitable. “We’ll attempt to grow the company as if we were the next big thing,” said Kennedy, “building a great stand-alone company or a great acquisition.”

Graphics courtesy of the NanOasis, Lawrence Livermore National Laboratory and the Pacific Institute.